It is half a century since Britain’s native car industry embarked on its long, painful decline, precipitated by Austin Allegros with rear windows falling off, endless strikes over the length of tea breaks and terrible commercial decisions such as to cede the hatchback market to overseas competition. But where Britain led, Germany and France now seem to be following. How much longer before names like Peugeot, Renault, and even Volkswagen, either disappear or become reduced to mere badges affixed to Chinese-designed and produced vehicles?
The retreat of the European car industry has cropped up from time to time in recent months. In October, Volkswagen announced, for the first time, its intention to close three plants in Germany. Although they were later reprieved, it will be at reduced production levels – and with the unions agreeing to 35,000 job losses by 2030.
There is no hiding from the scale of problems being faced by Europe’s car industry. In France, where it is extremely difficult to close factories because employers are forced to negotiate with workers’ councils before any kind of restructuring, 170 factories nevertheless shut down, taking with them 24,000 jobs. Many of the closed plants were owned by companies which supply the car industry, like Bosch and Michelin. Stellantis, which before Christmas announced the closure of Vauxhall’s plant in Luton, has shrunk plants across France and Italy. Since 2021, it has shed thousands of other jobs.
Europe’s car industry is under attack on three fronts. On the home front, mandatory electric car sales targets are running well ahead of interest from buyers. The German car industry, in particular, has been caught napping. Hybrid technology was developed in Germany, yet the lead was surrendered in the 2000s as German car makers concentrated on diesels instead – a market which was undermined when Volkswagen was caught out cheating on emissions tests. The irony is that even with mandatory targets staring them in the face, the European car industry has been unable to develop electric vehicles which buyers find attractive; meanwhile in China, where car-makers are not burdened with such targets, manufacturers have succeeded in coming up with affordable electric cars. There, pure electric vehicles took a 25 per cent share of the market last year – a percentage which European carmakers would love to achieve.
On the Chinese front, buyers have turned away from luxury European cars, with a serious impact on overall exports. Between 2016 and 2023, German car exports fell by a quarter, taking them back to 1990s levels. Proposals by the EU to protect European producers by imposing higher tariffs on Chinese-made electric cars have been opposed by the German car industry because they realise it would kill off exports to China for good.
Then, on the US front, Donald Trump’s threat of higher tariffs is in danger of delivering another knock. European carmakers are already suffering from Joe Biden’s Inflation Reduction Act, which offers bungs to US buyers of US-made cars.
Europe’s car industry might seem impregnable. For the moment, European streets are still full of European-made cars. But then the same was true in Britain in the early 1970s: that didn’t stop the industry falling on its knees a decade later. The signs are there that French and German carmakers are heading for a similar fall.
Comments